Tuesday, 14 April 2015

The Commission’s power of initiative: the CJEU sets important constraints

Steve Peers

As every EU politics or law
student learns, a key feature of the Commission’s role as the ‘motor’ of EU
integration is its near-monopoly on making proposals for EU action. But does
that near-monopoly – which the Commission likes to call its ‘right of
initiative’ – imply a corresponding power to withdraw proposals? And if so, are there any constraints on such a
power? The CJEU answered these questions in an important judgment today.

Background

The case concerned a proposal for
framework legislation on ‘macro-financial assistance’ for non-EU countries. This
type of assistance helps out non-EU countries which are in severe economic
difficulties, for instance helping them to make an imminent loan payment. It obviously
helps the economies of the countries concerned, thus indirectly helping EU companies
that export to them; and it undoubtedly cements the political relationship between
the EU and those countries.

Before the Treaty of Lisbon, such
aid was granted on the basis of the EU’s ‘residual powers’, which are now
provided for in Article 352 TFEU. However, that Treaty created a specific ‘legal
base’ for the EU to adopt rules on macro-economic support for third states:
Article 212 TFEU, which provides for the use of the ‘ordinary legislative
procedure’ to adopt legislation on this. The Treaty of Lisbon also created an
Article 213 TFEU, which allows assistance to be granted in urgent cases without
going through a full legislative process.

In 2011, the Commission proposed ‘framework
legislation’ on macro-financial assistance, which would have given it the power
to decide on the crucial question of which
third countries receive this money. The Commission’s decisions on this issue
would be controlled by means of the variant of the ‘comitology’ rules known as
the ‘examination procedure’, which gives Member States’ experts’ the power to
block draft Commission decisions. There’s no significant role for the European
Parliament (EP) in that process.

The Commission’s suggestions did
not satisfy the EP or the Council. The EP suggested instead that Commission
Decisions on which countries receive macro-financial help be subject to ‘delegated
acts’: Commission decisions which can be blocked by either the Council or the
EP. For its part, the Council position was that each decision to grant
aid to a third country had to be subject to the ordinary legislative procedure.
The two institutions began negotiations, and eventually agreed to use the
ordinary legislative procedure to this end.

Since the Commission objected to
this aspect of the EP/Council deal in principle, it withdrew its proposal before the
institutions could adopt the legislation concerned. The Council responded by taking
the rare step of suing the Commission. While the Council was supported by ten
Member States, the EP did not intervene on either side – despite the huge
stakes for that institution.

The judgment

The Court’s judgment started out
by accepting that the Commission’s power to make proposals gives it a corollary
power to withdraw them. However, that power did not constitute a ‘right of veto’
in the legislative process, since that would upset the principle of institutional
balance and conferral of powers. In short, the Commission has the power to
withdraw proposals – but that power is constrained.

So how exactly is that power
constrained? The Court ruled that the
Commission had to give the EP and the Council its reasons for such withdrawals,
which must include ‘cogent evidence or arguments’. Such withdrawal decisions
must be subject to judicial review, in the form of actions for annulment. However,
it was sufficient to give those reasons to a Council working party and an
EP/Council negotiation meeting.

As for the substantive grounds
for withdrawing its proposal, the CJEU ruled that the amendment which the EP
and Council wanted would have changed an ‘essential element’ of the proposal, and
would have been irreconcilable with the ‘objective’ of improving the efficiency
of EU policy in this area. Next, the CJEU ruled that there was no infringement
of the principle of democracy, since it was inherent in the Commission’s right
of initiative that it could withdraw proposals as long as the Council had not
yet acted. So the Commission did not infringe the principles of conferral of
powers and institutional balance.

Finally, the Court considered a
separate issue: whether the manner of
the Commission withdrawing its proposal breached the principle of ‘sincere
cooperation’ between the EU institutions. On this point, the Court ruled that
the Commission could not be criticized for withdrawing its proposal at a very
late stage in the Council/EP negotiations, since only then had it become clear
that the co-legislators would insist that the ordinary legislative procedure
had to be used for the approval of each new macro-financial assistance
decision. Moreover, the Commission had attempted to reconcile the position of
the other institutions, and had proposed compromises. It seems implicit from
the Court’s analysis here that the EP’s position (delegated acts instead of a
comitology process) would not have
altered the essential elements of the proposal.

Comments

First of all, what are the
immediate consequences of this judgment? The failure of the legislative process
in this case didn’t stop the EU granting macro-financial assistance to third
States. In practice, in the absence of framework legislation on this subject,
the EU has been adopting individual legislative measures to assist each country
– which is exactly what the Commission objected to in the first place.

What procedure should govern such decisions, as a
matter of principle? The CJEU seems to adopt the Commission’s view that
efficiency is the main criterion. There is indeed a good argument for
efficiency in the specific context of
macro-economic assistance – since the bills usually have to be paid imminently,
and the third country concerned is often in desperate straits. But the
Commission and Court don’t refer to this specific context, and don’t balance
the need for efficiency against the contrary case for full democratic control.

For example, one recent major beneficiary
of EU macro-financial assistance has been Ukraine, and the EU’s relations with
that country have been highly controversial. Ideally, there should be a full
democratic debate on whether the EU should support that country’s economy,
allowing those who sympathise with Putin’s Russia or who have other reasons to
criticize the Ukrainian government to debate the merits of that assistance with
those who support that government. Perhaps a good compromise would have been an
agreement by the Commission to make a full legislative proposal whenever a
significant minority (say a quarter of the Member States and/or a quarter of
the Members of the European Parliament) indicate a wish to debate the merits
of giving macro-financial assistance to a particular third State.

Secondly, the broader
consequences of today’s judgment concern the relations between the EU’s three
political institutions. The judgment has both procedural and substantive
dimensions. Procedurally, it seems very easy to justify a Commission withdrawal:
it need only inform EP/Council ‘trialogue’ (negotiation) meetings, or a Council
working party of its intentions. Here the Court is legitimising these informal
elements of EU governance (thanks to Ron Patz for raising this point). However,
with respect, its approach is not convincing. Since a legislative proposal
affects the EP as well as the Council, informing a Council working party cannot
be sufficient. In fact, informing a trialogue committee shouldn’t be sufficient
either, since there are many MEPs and Member States not represented there (the
Council Presidency negotiates on behalf of all Member States as represented in
the Council).

More broadly, the Commission
should have to justify its withdrawals openly to the general public. It usually does this when it withdraws proposals as
part of its work programme, but the principle of openness (as set out in the
Treaties) justifies it becoming a legal rule, applying to every case of withdrawal.
The best practice would be to adopt a formal Commission Decision to withdraw each
proposal published in the EU’s Official Journal, giving effect to the principle
of active transparency.

Indeed, it’s disturbing that the
Court conceives of the EU system purely in terms of the institutions’ accountability
to each other, rather than to the public generally. The Court’s dismissal of the
‘democratic principles’ argument is far too brief, failing to place that principle
on an equal footing (never mind a superior footing) with the institutional
rules on the Treaty. The better approach would have been to interpret the lacuna in the Treaties regarding
withdrawal of Commission proposals in light of this democratic principle, emphasising
the key role which that principle gives to the EU institutions with a greater claim
to electoral legitimacy.

On the other hand, the Court does
confirm that there must be judicial
control of the withdrawal of Commission proposals. The application of the
annulment procedure means that not only the Council, but also the EP and individual
Member States can sue the Commission for withdrawing a proposal. Other parties
are likely to lack standing to do so, except for a limited number of cases where
Article 263 TFEU confers it to bring challenges to non-legislative acts. The
alternative possibility of bringing proceedings via national courts to
challenge withdrawals appears unworkable at first sight.

What are the substantive constraints
to the Commission’s withdrawal of its proposals? The CJEU hints that there
might be additional constraints after the Council has ‘acted’; presumably this
refers to the Council adoption of its first reading position. Only a minority
of EU legislative proposals go past this first reading – and half of those have
in practice been agreed between the EP and Council already at that stage. It’s
not clear what additional constraints might then exist, besides those set out in
the Treaty (for instance, it’s easier to amend a Commission proposal in some
cases after first reading). It’s also possible that the Court would take a
different approach to non-legislative measures, or those subject to a special
legislative procedure.

So let’s focus on the usual case –
a withdrawal of a proposal for a legislative act pursuant to the ordinary legislative
procedure, before the Council adopts its first reading position. The Court did
not suggest that a change in the essential elements of a Commission proposal
was the only ground to withdraw a
proposal. Presumably it is still open to the Commission to withdraw proposals
on other salient grounds, in particular the most common grounds for withdrawal:
where the proposal is obsolete, or there is no chance of its adoption.

However, the existence of
judicial review must mean that the Commission’s assessment in this regard could
be open to challenge. The Court might also be called upon to clarify in another
case what constitutes a change in the ‘essential elements’ of a proposal, where
(for instance) the EP and Council want to widen or narrow that proposal’s scope
significantly. There is no reason why the ‘essential elements’ rule is
restricted to cases where the objective is improving the efficiency of EU
actions, since there are many other possible objectives for EU action.

What other grounds for withdrawal
exist? It seems implicit in the judgment that the Commission cannot simply
argue that it has changed its mind, otherwise judicial review would have no
purpose. There must be substantive reasons justifying that change of mind. Would
it be sufficient that there is a new Commission? This is obviously a live
issue, given that the Juncker Commission recently withdrew a number of
proposals (for instance, the ‘circular economy’ proposals) on the grounds that
it had changed its legislative priorities, and wished to start the process from scratch (see discussion here). At first sight, since the proposals can always be redrafted during the legislative procedure, this is not a sound enough reason to withdraw a proposal, in light of today’s
judgment – and there is still time to bring an annulment action against these
withdrawals. There might conceivably be
an argument that a new Commission has more flexibility to withdraw proposals –
but that begs questions as to whether it has a genuine democratic mandate, in
particular if the Commission President did not campaign on the basis that the
proposals in question should be withdrawn.

Finally, it might be arguable
that today’s judgment has implications not only for the Commission, but for the
‘sincere cooperation’ during the legislative procedure between the EP and the
Council. For instance, the EP and Council have been far apart for years as
regards a proposal for maternity leave. As I recently pointed out (see here),
the EP has shown recent signs of willingness to negotiate, which the Council
has rejected. For its part, the Commission
has done little to try and broker a compromise, but has simply resorted to
threatening to withdraw the proposal if there is no deal. Can the EP sue the
Council for its intransigence? Can it sue the Commission if it follows through
on its threat to withdraw the proposal, having played no constructive role in
the talks? If the EU institutions and Member States make frequent use of the
possibilities opened up by today’s judgment, this judicial intervention into the
legislative process raises many such important questions.

1 comment:

For an alternative point of view on this case, see P. J. Kuipers: http://acelg.blogactiv.eu/2015/06/01/commissions-right-of-withdrawal-of-proposals-curtailment-of-the-commissions-right-or-acceptance-by-the-court-of-the-commissions-long-standing-position/